Alex Osola (2:58)

Conrad says surging prices are hitting people's wallets.

Conrad Putsir (3:01)

Inflation is now so high that it basically ate up wage increases of Americans over the past year. That's a big deal because it basically means Americans aren't really better off than they were a year ago unless they own stocks. But this month's report was actually somewhat good news for lower income households because rent growth was somewhat benign because food inflation so far was fine.

Alex Osola (3:22)

But Conrad says it might not change much for the Fed.

Lawrence Norman (3:25)

Right.

Conrad Putsir (3:26)

A lot of this depends on how long the shock will last. If this is a brief blip, prices go up and then they come down again. It's not really going to be a problem. If this is a sustained situation, the price of energy keeps rising. This becomes a tricky situation for the Fed. Right, because on the one hand you have higher inflation, but on the other hand you have consumers that are being squeezed by all this and that means they're spending less in all likelihood, and that hurts the economy. A lot of the economists I talk to actually think that if this drags on, that might actually make it more necessary to stimulate the economy by lowering interest rates.

Alex Osola (3:56)

That was economics reporter Konrad puts here. And a separate piece of data shows that consumers are worried about the Iran war affecting the US economy. The University of Michigan's consumer sentiment measure fell this month to the lowest level in over 70 years. The US and Iran are gearing up for high stakes talks in Islamabad, Pakistan tomorrow. The negotiations would be the highest level direct talks between the US and Iran since the 1979 Iranian Revolution. This morning, as the US delegation set off, Vice President J.D. vance told reporters that the President had given guidelines for the discussions.

J.D. Vance (4:34)

As the President of the United States said, if the Iranians are willing to negotiate in good faith, we're certainly willing to extend the open hand. If they're going to try to play us, then they're going to find that the negotiating team is not that receptive. So we're trying to have a positive negotiation. The President has gave us some pretty clear guidelines and we're going to see.

Alex Osola (4:51)

Journal reporter Lawrence Norman is covering the talks which aim to convert this week's ceasefire into durable peace Lawrence, what is the tone coming into these negotiations?

Lawrence Norman (5:00)

Pretty bad, I think, is fair to say. I mean, the US Is talking about the importance of reaching a deal and President Trump wants to talk and he's just tweeted out it's going to be some huge reset. The Iranians think that they've survived the war and they're making all kinds of preconditions for the talks and talking about the enemy that they've destroyed and converting their battlefield wins into diplomatic wins.

Alex Osola (5:24)

What is the leverage that Iran has and what leverage does the US have?

Lawrence Norman (5:28)

So the Iranians biggest leverage now is their control of the Strait of Hormuz. That is a huge economic problem for the rest of the world. And it's going to be pretty difficult to wrest control from Iran militarily. The survival of the regime after 40 days of being pummeled by the Israeli and US Air Force is a kind of leverage. But more importantly, they still have nuclear assets, in particular, highly enriched uranium that they could use to build a nuclear weapon. On the US Side, they obviously have military leverage, but the US Also has powerful economic sanctions that force not just US Companies, but most of the world not to do business with Iran. Iran's number one goal for many years has been the removal of those sanctions, and that is hefty leverage. The US has it in its pocket.

Alex Osola (6:22)

Right. So given those sanctions, what are going to be some of the issues that they'll be negotiating at the talks?

Lawrence Norman (6:28)

So number one issue is what happens to Hormuz? How can the world get vessels back through the Hormuz? And in return for Iran giving greater freedom, even if it maintains some control, what does Iran get? The number two issue, the US Wants Iran to stop enriching uranium and to close down its nuclear program. Iran has spent 15 years, 20 years telling the US it won't do that. That will need to be resolved. That will take a serious amount of time and the two sides are quite far apart.

Alex Osola (7:00)

Seems like there's a lot to resolve in a two week ceasefire. What is the range of outcomes that could result from these discussions?

Lawrence Norman (7:07)

What I would say based on covering this for a very long time, is when you can kick issues down the road, you do. And I think the most likely is to come up with some kind of temporary arrangement that gets you through the two week period that makes this brief ceasefire into a longer term ceasefire, an open space for a real negotiation in the coming weeks, months, potentially years, because the only two alternatives are one, you can resolve all of these issues in two weeks, which is really impossible. And the second is that zorks fail and they go back to war, which is plausible, but it's fairly clear that both sides don't want to do it.

Alex Osola (7:51)

That was WSJ reporter Lawrence Norman. Thanks, Lawrence.

Lawrence Norman (7:54)

Thanks a lot.

Alex Osola (7:56)

Coming up, the conflict in the Middle east is choking off a key supply of the world's jet fuel. We'll get into what airlines are doing to cope after the break.

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Alex Osola (8:42)

The war in Iran has triggered a shortage of jet fuel across the world, and the travel industry says the ceasefire, even if it holds, isn't going to fix the problem. China has stopped exporting jet fuel so it can meet its own needs. Airports across Asia are already running out of supply, and Europe could run into severe shortages as soon as next month. To deal with that, airlines are trimming their schedules and piling on fees. And in California, OpenAI said today that a person was arrested after allegedly throwing a Molotov cocktail at CEO Sam Altman's home and making threats at the company's San Francisco headquarters. OpenAI says no one was hurt its San Francisco offices were open today with increased security. Major US indexes ended the day mixed the the Dow fell 0.6% and the S&P dropped 0.1%. Meanwhile, the Nasdaq closed up 0.4%, rising for the eighth straight day and exiting correction territory, I.e. it closed up more than 10% from its recent low. For the week, all three indexes ended up 3% or more. Stocks marked their best weekly gains of the year, with investors hoping for a diplomatic end to the Iran conflict. And US oil prices slipped 1.3% to $96 and 57 cents a barrel. This week, they tumbled 13%, their biggest weekly decline since 2020. After about 10 days in space, NASA's Artemis 2 mission is expected to splash back literally into the Pacific Ocean tonight around 8pm Eastern. The crew has made it around the moon and flown a record distance from earth, more than 248,655 miles. Victor Glover, one of those astronauts, said in a press conference earlier this week that he's been thinking about tonight for a while.

J.D. Vance (10:28)

I've actually been thinking about entry since April 3, 2023. When we got assigned to this mission and one of the first press conferences, we were asked, what are we looking forward to? And I said, splashdown. And it's kind of humorous, but it's literal as well that we have to get back.

Alex Osola (10:44)

But as WSJ space reporter Micah Madenberg is here to tell us, the trickiest part is still to come. Micah, you were just telling me you're on pins and needles for tonight's planned landing. Seems like you're not the only one. But getting into Earth's atmosphere is the hardest part of this mission. Why is that?

Micah Madenberg (11:01)

Okay, so you have this vehicle that is soaring toward Earth, and after a couple of maneuvers, the crew capsule right where the astronauts have been living and working. It's essentially going to slam into the Earth's atmosphere, and that's going to create just an extraordinary amount of heat that the capsule has to transfer away from it to keep the vehicle and, of course, the crew members safe. During a press conference yesterday, there was one leader at NASA who basically said he has no rational fears left about this re entry, that every reentry of a spacecraft with humans on board is a bit of a white knuckle moment.

Alex Osola (11:38)

Let's talk about the mission up to this point. What has it accomplished? And have things more or less gone according to plan?

Micah Madenberg (11:45)

The crew conducted an extensive campaign of system tests, like how to get on, like, emergency suits if something goes wrong, how to prepare for medical emergencies, and they also did a ton of, like, lunar science. So that's a lot in the bag already for NASA. There have been a number of glitches along the way. A small propellant leak in Orion's propulsion system, but it's been relatively smooth so far.

Alex Osola (12:13)

Yeah. What does the success of this mission mean for NASA's future plans?

Micah Madenberg (12:19)

Those NASA leaders and the crew themselves have described Artemis 2 repeatedly as a stepping stone to bigger and better things. In 2027, the agency and a couple of its contractors want to test out how Orion docks with lunar lander vehicles in low Earth orbit. That's supposed to help everybody get prepared for lunar landing of a crew in 2028. Now, a lot of people I talk to don't believe that it's possible, but that's the goal. And that's what like, industry and the agency are currently driving for.

Alex Osola (12:56)

That was WSJ space reporter Micah Madenberg. Micah, good luck tonight. Thank you.

Micah Madenberg (13:00)

Thanks for having me.

Alex Osola (13:01)

We'll be live streaming the landing on WSJ.com and that's what's news for this week. Tomorrow, you can look out for our weekly markets wrap up, what's news and markets. Then on Sunday. The U.S. economy has navigated a pandemic, high inflation and global tariffs. We explore three things that could still sink it. That's in what's New Sunday. And we'll be back with our regular show on Monday morning. Today's show is produced by Anthony Bansi and Alexis Green, with supervising producer Tali Arbel. Michael Lavall wrote our theme music. Aisha El Mouslim is our development producer. Chris Zinsley is our deputy editor. And I'm Alex Osola. Thanks for listening.

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